Dawson-Hinkler Well
(U3O8 Limited 100%)
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JORC Compliant Report of Inferred Mineral Resource of in excess of 10 million pounds U3O8
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Scoping Study shows positive economics
U3O8 Limited has completed several reverse circulation drilling programmes on the Dawson-Hinkler Well project. The Company has drilled four prospects within the Dawson-Hinkler Well project (Dawson West, Dawson East, Hinkler West, Hinkler) in detail and has subsequently completed a JORC-compliant resource estimate.
Following receipt of all drilling data, U3O8 Limited contracted consultant group Hellman & Schofield Pty Ltd to perform the resource estimation of the Dawson-Hinkler Well deposit. The resource estimation is based on both the historical drilling and the two reverse circulation drilling programmes completed by the Company in 2006.
Wire framing of the mineralisation was undertaken in MICROMINE using a 100ppm U3O8 cut-off grade for intervals in excess of 0.2m. This was used to exclude irrelevant samples beneath the main body of mineralisation.
Duplicate radiometric logging of a selection of holes (approximately 1 in 20) and repeat logging of a reference hole (once a day) all indicate that radiometric logging is of a high quality and that data compares within acceptable and expected variation. Corrections for hole diameter and water was conducted on all drilling undertaken by U3O8 Limited. A number of early holes drilled by Western Mining were assumed entirely dry and no water correction for gamma absorption had been conducted at the time of logging. A slight low bias in measured U3O8 at deeper levels on some WMC holes is evident when compared with appropriately corrected data. The impact on the resource is not significant.
Results of the resource estimation were reported using cut-off grades between 100 and 300 ppm U3O8. Estimates were generated using the method of Ordinary Kriging (OK) of uranium grades based on downhole radiometric data.
The table below summarises the resource estimate at the various grades used.
| Cutoff Grade (ppm U3O8) |
Grade (ppm U3O8) |
Tonnes (millions) |
U3O8 (tonnes) |
U3O8 (million lbs) |
| 100 | 163 | 51.5 | 8,400 | 18.5 |
| 150 | 228 | 20.7 | 4,700 | 10.4 |
| 200 | 293 | 9.5 | 2,800 | 6.2 |
| 250 | 341 | 5.6 | 1,900 | 4.2 |
| 300 | 383 | 3.5 | 1,300 | 2.9 |
Inferred Resources Dawson-Hinkler
There remains potential at Dawson-Hinkler to increase the resource by completion of further drilling. An additional drilling programme was completed in 2007 but those results have yet to be incorporated into the existing resource.
Assuming an annual production of 1 million pounds of U3O8 and a 10 year mine life, total operating costs of US$52/lb U3O8, a Net Present Value of US$104.6 million and an Internal Rate of Return of 117.7% is indicated by the study.
The study was completed by Perth consultants Independent Metallurgical Operations Pty Ltd, based on the Company's Inferred Mineral Resource at Dawson-Hinkler prepared by Hellman and Schofield Pty Ltd.
The main assumptions used in the study include:
(i) Long term uranium price of US$95/lb U308.
(ii) Leach recovery of 90%.
(iii) Long term exchange rate A$ to US$ - 0.8.
(iv) Cost of capital 8%.
(v) Production of 1 to 1.5 million pounds of U3O8 per year.
(vi) Waste to ore strip ratio 1:1.
The purpose of this study was to establish economic viability based on conservative assumptions. In addition to the positive impact of further resource development, the rate of return is expected to improve based on operating cost improvements, increased uranium prices, and the option of toll treating through a central mill facility. Operating cost improvements could potentially be realised through radiometric ore sorting and or scrubbing, resulting in significant upgrade of the ore and resulting in significant reduction in processing costs. Capital expenditures will also be reviewed to ensure the use of best practices and economics of scale. This study has not allowed for the realisation of value due to the sale of vanadium, a bi-product of the process.
Assuming an annual production of 1 million pounds of U3O8 and a 10 year mine life, total operating costs of US$52/lb U3O8, a Net Present Value of US$104.6 million and an Internal Rate of Return of 117.7% is indicated by the study; Life of mine revenues have been estimated to be in excess US$880 million. The Conceptual study included sensitivity analyses for production scenarios at 100ppm, 150ppm and 200ppm U3O8 cut-off grade. Base case sensitivities to variations in capital and operating costs were estimated though a ±35% range of accuracy. The study shows the relative impact of operating costs significantly outweighs the impact of capital cost. This result highlights the need to review upgrading technologies such as radiometric sorting and scrubbing of the ore feed.
UTO believes substantial additional
In summary, this scoping study highlights the Dawson-Hinkler project to be a viable project with a significant potential cash flow to the company over a number of years. Further studies will need to be undertaken to optimise the costs and increase the Net Present Value of the project. Such studies will include increases in ore resources following further drilling (less than 10% of the tenement holding at Dawson-Hinkler has been explored), collection of metallurgical samples, metallurgical testwork to increase recoveries, close spaced channel sampling in costeans to assess small scale grade variabilities and variations in bulk densities, upgrading through radiometric sorting and scrubbing, and the sale of vanadium as a bi-product.